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UK roundup: Western United scheme, Rothesay Life, PGL Pension Scheme, Aon Hewitt

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The Western United Group Pension Scheme has begun its wind up process by insuring its remaining liabilities in a £280m (€350m) bulk annuity buyout with Rothesay Life.

This is the third and final arrangement struck between the two parties, as Rothesay previously insured £220m of the scheme’s liabilities through buy-in contracts.

The scheme is sponsored by the Vestey Group, which has supported the insuring of liabilities for the 14,000 member, £500m scheme.

The scheme used a liability-driven investment (LDI) transition fund, operated by F&C Asset Management, which allowed the scheme to make the move from the pooled LDI holdings, reducing exposure to market risk and transaction costs.

Independent chair of trustees, Peter Thompson, of BESTrustees, said securing the full buyout with Rothesay so soon was not on the agenda earlier in the year.

“We were pleased that Rothesay Life was able to move very quickly to deliver a comprehensive solution and provide security for our members well ahead of schedule.”

Vestey Group’s head of reward, Ben Fowler, added: “Less than two years ago we could not have envisaged securing a full buyout over this timeframe.

“It requires a great deal of preparation and collaborative effort to complete these deals and we have been fortunate to have a committed group of trustees.”

In other de-risking news, the trustees PGL Pension Scheme, 12,000 member scheme with over £1bn in assets, have arranged a longevity swap for around £900m of the scheme’s liabilities.

The arrangement was agreed with Phoenix Life, an insurance company within the scheme’s sponsor company, Phoenix Group.

Martin Bird, senior partner at Aon Hewitt, advisers to the trustees, said the deal highlighted the innovation within the longevity risk market, particularly around the use of associated insurers to access the reinsurance market.

This mirrors similar deals done by the Aviva Pension Scheme which transferred £5bn of longevity risk to the reinsurance market, via its sponsor Aviva.

The BT Pension Scheme set up a wholly owned insurer to directly access the reinsurance market for its £16bn deal last month.

Matt Wilmington, partner in Aon Hewitt’s risk settlement business, said: “The arrangement was a win-win for trustees and Phoenix Life, reducing risk in the scheme and allowing the insurer to structure its capital arrangements more efficiently. 

“We also expect a number of other insurers who are in a similar position with large defined benefit pension schemes to consider a similar type of arrangement.”

Law firm CMS Cameron McKenna advised the trustees.

Partner, James Parker added: “Disintermediation is at the very cutting edge of developments in the longevity market and this transaction is strong evidence of a growing trend.”

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